Please ensure Javascript is enabled for purposes of website accessibility

The Fresh Market Soars on Kroger Acquisition Interest

By Timothy Green - Feb 11, 2016 at 3:55PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The specialty grocer is reportedly auctioning itself off, and Kroger and some private equity firms have shown interest.

What: Shares of The Fresh Market (TFM) jumped on Thursday following a report from Reuters that supermarket giant Kroger (KR 0.02%) wants to acquire the company. At 3:15 p.m. ET Thursday, shares of The Fresh Market were up about 16%, while shares of Kroger were down less than 1%.

So what: According to Reuters, Kroger is in the second round of an auction process for The Fresh Market. Various private equity firms, including Apollo Global Management and KKR & Co., are said to also be interested in potentially acquiring the specialty grocer.

In October, The Fresh Market announced that it would conduct a strategic review of its business and strategy, and this auction process appears to be the result of that plan. The company has faced growing competition from traditional supermarkets like Kroger, which have been increasing the amount of natural and organic foods sold in stores.

The Fresh Market wouldn't be the first upscale chain purchased by Kroger. Back in 2014, the company acquired Harris-Teeter, a North-Carolina based supermarket chain. With The Fresh Market having a market capitalization of about $1 billion, any buyout would likely involve a significant premium to that level.

Now what: There's no guarantee that Kroger will end up winning the auction or that The Fresh Market will sell itself at all. For Kroger, an acquisition would boost its revenue by less than 2%, although The Fresh Market does manage far higher margins than Kroger's existing business.

It's unclear whether a deal will be announced, but investors should remember that buying a stock solely based on the hope that the company will get acquired is rarely a good idea.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Kroger Co. Stock Quote
The Kroger Co.
KR
$48.46 (0.02%) $0.01
The Fresh Market, Inc. Stock Quote
The Fresh Market, Inc.
TFM

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
336%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.